Sydney-based grocery and hardware wholesaler Metcash will be the first company in seven years to challenge a ruling by the competition regulator in court.
Metcash yesterday gave notice that it intends to pursue its attempted $215 million takeover of Franklins which was rejected by the ACCC earlier this month.
Metcash yesterday notified the Australian Competition and Consumer Commission that it intended to take further steps to proceed with the proposed transaction in at least five business days time.
Metcash said it had also agreed with the current owner of Franklins, South Africa’s Pick n Pay Retailers, to extend the agreement’s cut off date to June 30, 2011.
The ACCC said last week it would oppose Metcash’s bid for Franklins because it would effectively give Metcash a monopoly on grocery wholesaling to independent NSW supermarkets.
The ACCC started a review of the proposed sale after Pick n Pay Stores Ltd announced on July 1 it had decided to sell Franklins to Metcash.
Metcash is Australia’s largest wholesale and distribution company to independent retailers, including IGA stores.
Franklin also offers a full range of wholesaling services, terms, rebates and prices to 88 independently owned and operated grocery stores.
The ACCC is concerned about the impact of the deal on the wholesale sector of the industry in NSW.
The ACCC singled Metcash out for special comment in its grocery industry inquiry two years ago – the ACCC argued then that, far from helping the independent grocers, Metcash was exploiting its market power by charging them too much for selected items.
In a statement last week Metcash CEO Andrew Reitzer said "Metcash is committed to championing independent grocery retailers.
"This transaction would have resulted in the most competitive outcome for consumers. The NSW market share of IGA retailers would have increased from 11% to 18% leading to greater supply chain efficiencies and more competitive selling prices.
"Metcash is concerned that the ACCC’s decision will lead to the national chains acquiring a significant number of the Franklins stores.
"Despite the ACCC’s proposed scrutiny of each acquisition, past experience has shown that the national chains will be able to acquire a number of the Franklins stores.
"This will simply entrench their dominant position by lifting their market share in NSW to the highest level of any state in Australia", he added."
Metcash shares slipped 3c to $4.34 yesterday, but then recovered to close steady at $4.37.
Troubled drugs maker and wholesaler Sigma Pharmaceuticals has cut its 2011 full year earnings guidance.
The company told the ASX yesterday that earnings before interest and tax (EBIT) for the 12 months to January 2011 would be $120 million to $130 million, compared with the previous guidance of $140 million to $150 million.
That doesn’t include the cost of write-downs and impairments of $220 million and booked into the first half.
The latest guidance includes the pharmaceutical division, for which the company reached a formal sales agreement with South Africa’s Aspen Pharmacare Holdings Ltd for $900 million.
Sigma said that trading continued in line with expectations, but a number of transitional arrangements with Aspen meant that the company had agreed to cancel a number of planned product promotions.
There was also likely to be additional corporate expenses of $5 million to $7 million.
Sigma said that the sale of its pharmaceuticals division would allow the company to reduce debt, consider capital initiatives such as special dividends and retail full ownership of the healthcare division, including the wholesale and retail businesses.
"The board considers the sale of the pharmaceuticals division to Aspen to provide the best outcome for Sigma shareholders," Sigma chairman Brian Jamieson said in the statement yesterday.
In the statement, Sigma CEO Mark Hooper said, “Following the sale, Sigma will focus on business improvement initiatives and organic growth opportunities that build upon the strong relationships with our extensive pharmacy network.
"We will have an ongoing relationship with Aspen, which has the potential to provide a number of benefits. In particular, we have entered into a long-term supply agreement, under which Sigma will act as Aspen’s preferred distribution partner, and arrangements whereby Aspen will manufacture product for Sigma on an ongoing basis.
"The sale is subject to a number of conditions precedent, including Sigma shareholder, lender and regulatory approval.
"Directors will provide further information on the transaction in an Explanatory Memorandum and Notice of Meeting to be sent to shareholders in the near future.
"Sigma expects to hold an Extraordinary General Meeting to consider the sale in mid January 2011."
Sigma’s pharmaceuticals division includes its generics, consumer, OTC, Herron, ethical products, medical products, orphan and manufacturing businesses.
Sigma also said in the statement that it was discussing the possibility of extending a loa
